How the booming market for private loans has saddled millions of students with $136 billion in debt that can't be forgiven.
. Despite the political furor over student-loan forgiveness, private-loan holders are not only left out of the federal-relief conversation but also forced to navigate a hard-to-regulate industry that sometimes leaves borrowers with predatory loan terms they can't escape. For Jones, the crushing weight of her loan has forced her to pick up side jobs and try to pay it off as fast as she can — a desperate race against the ever-soaring interest payments.
Suzanne Martindale, the senior deputy commissioner for consumer protection at California's Department of Financial Protection and Innovation, told me that the issue with borrowers seeking out private lenders was "that there has not been a ton of federal oversight. She added: "And there really isn't much by way of federal regulation to govern those kinds of products and services.
in a 2008 paper. "Regardless, the student loan debt that was supposed to be an investment in their futures is dragging them down."In between study sessions, exams, and campus parties, deciphering complex student-loan terms has become a standard part of students' higher-education experience. To improve their life prospects, 18- and 19-year-olds are expected to comb through pages of virtual paperwork and go "interest-rate shopping" to see which lender has the best terms.
And once borrowers sign on the dotted line, they open themselves up to aggressive debt collection and misleading behavior, such as communications from the lenders that do not clearly disclose the terms of the loan. These tactics have started attracting the attention of federal and state regulators.
, he does not have the jurisdiction to offer relief programs to people with private lenders. That means private borrowers didn't benefit from the student-loan-payment pause that began in March 2020 — and they wouldn't have been included in Biden's plan to cancel up to $20,000 in student debt per borrower had the Supreme Court upheld it.
To be sure, some private servicers do disclose benefits private borrowers could lose should they choose to refinance. Navient, for example, has a disclosure on its website that says refinancing a federal student loan "means you will no longer have access to federal loan benefits" or "any other relief measures."
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